South Africa’s SPAR Group expects first-half earnings to decline sharply, citing margin pressure, operational issues in KwaZulu-Natal (KZN), and higher impairments, as it advances the sale of its UK business.
In its trading update, the company said revenue from continuing operations for the 26 weeks ended 27 March 2026 increased by 2.1%.
Revenue in Southern Africa increased 1.7% while Ireland reported revenue growth of 2.2% in euro terms and 3.4% in rand terms.
SPAR Health revenue climbed 26.1% while revenue from the Build it division rose 1.3%.
The group said headline earnings per share (EPS) from continuing operations are expected to decrease by 60% to 50% year-on-year to between 174 cents (c) and 217c, from 434c in the prior-year period.
EPS from continuing operations are expected to decline by 65% to 55% to between 140c and 180c, compared with 399c a year earlier.
Spar said earnings were affected by margin compression in Southern Africa, elevated Black Friday promotional spending, underperformance at its KZN distribution centre, above-inflation cost growth and higher debtor impairments.
Gross profit margin in Southern Africa fell by between 20 and 40 basis points during the period.
According to the group, performance in KZN was negatively affected by strategies that prioritised top-line growth over profitability, as well as logistics capacity planning issues that disrupted service levels and raised costs.
It said KZN recorded three consecutive profitable months in February, March and April 2026 after corrective measures and leadership changes.
In Ireland, BWG Group improved gross profit margin and operating margin during the period, supported by better supplier trading terms and a favourable sales mix.
Spar recognised approximately R128m ($7.8m) in extraordinary impairments during the period, compared with R71m in the prior period.
These included goodwill impairments, corporate store impairments and impairments of assets held for sale.
Including discontinued operations, headline EPS are expected to fall by 65% to 55% to between 104c and 133c, from 296c in the prior-year period.
Separately, the company said last month that it had entered an asset purchase agreement with AF Blakemore & Son for the disposal of its UK business.
The transaction includes the right to operate Spar in South-West England, 71 company-owned stores, warehouse and logistics infrastructure, and associated independent retailer supply agreements.
The disposal is expected to be completed in stages between June and September 2026, with the UK business continuing to be classified as a discontinued operation.
Looking ahead, SPAR said it is implementing initiatives focused on KZN margin recovery, retailer engagement, cost realignment and improving operating leverage while remaining cautious about rising fuel costs, debtor risk, intensifying competition and broader macroeconomic uncertainty.
“SPAR sees first-half earnings fall as UK divestment moves ahead ” was originally created and published by Retail Insight Network, a GlobalData owned brand.
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